Carsales.com enters Trading Halt After Announcing Acquisition
- Car sales will acquire 49 per cent of Trader Interactive for $624 million.
- The Acquisition will be funded by debt and a $600 million Entitlement offer.
- Trader Interactive is a digital services company for non-automotive trading.
Carsales.com (ASX: CAR) has today entered a trading halt after announcing the planned Acquisition of Trader Interactive and a subsequent capital raising to the ASX. Carsales.com has entered into a securities purchase agreement to purchase 49 per cent of the United States-based business. The proposed Acquisition as a clear indication of the businesses focus and intention for international expansion.
Founded in 2009, Trader interactive is a digital services company that provides a range of online platforms for Powersports, vehicles, commercial trucks and other equipment. The company’s most notable platforms, including Aero Trader, ATV Trader, RV Trader, Cycle Trader and Snowmobile Trader, reach over 7 million users. Carsales.com have described the company as a “highly profitable business with a strong growth track record of success.” The company exhibited US$123 million in revenue for the calendar year 2020.
Carsales.com themselves already provide an online listing of used cars and car financing services with the major of their revenues generated through site traffic. Throughout the previous 12 months, a strong used car market has significantly supported the company with the company’s first-half results delivering strong earnings growth across all segments. In particular South Korea outperformed, recording growth in revenues of 23 per cent.
The recent Trader Interactive Acquisition reflects Carsales.com’ further expansion into the large US market. The continued maturity of the US non-automotive market, extensive spending in online advertising and strong economic conditions in the US are likely o bode well for the company. Carsales.com will purchase 49 per cent of the company for US$624 million or AU$797. The transaction is forecasted to positively impact earnings per share and not impact Car sales current dividend policy. The Acquisition will be funded by a full underwritten Entitlement offer in order for $600 million and an upsized debt facility from existing lenders.
Carsales.com also provided an update on forecasted FY21 performance. Adjusted Revenues, Earnings before interest, depreciation, taxation, and amortization (EBITDA) and Net Profits After Tax (NPAT) are expected to grow 3-4, 8-10 10-11 per cent respectively.
As of the market close on the 11th of May 2021, Carsales.com is trading at $19.51 per share, 2.45 per cent lower year to date. The company’s rapid recovery from COVID-19 has been relatively subdued since they reached all-time highs in October 2020. Moving forward, the company expects strong business condition “across all its segments for the remainder of the financial year."